While consumer confidence surged to end May, the beginning of June saw a bit of an ease in sentiment levels. However, consumers still remain optimistic about the future.
With slight uncertainty about the future of consumer spending, retailers could be in store for an unpredictable couple of months. Whether sales rise or fall, these companies could benefit from inventory financing.
The Bloomberg Consumer Comfort Index dropped to minus-31.3 during the week ending June 9 – the lowest since early April.
"Much of the improvement in sentiment over the last six months has had to do with modest wealth effects," said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. "As volatility has crept into the market, middle- and some upper-income earners likely are becoming more concerned about the state of their financial portfolios."
Despite the decline in the index, rising home and equity values have helped boost the outlook for many U.S. households.
Should consumers begin to spend more, and it translates into more sales for retailers, small- to medium-sized businesses may need to replenish inventory.
Without enough capital to do so on their own, inventory financing could be beneficial, which allows retailers to use current product as collateral to obtain a revolving line of credit. This can than be used to purchase product to keep shelves stocked.
Meanwhile, retailers experiencing lower sales levels could also use this form of asset-based lending. During these trying times it can be difficult to operate at normal levels, but the revolving line of credit can make this possible. Much like when new product needs to be purchased, small-to medium-sized retailers are often turned away from banks, which makes asset-based lending a great option.